MEcon Master of Economics International Trade and Finance 3

Question 1

Stolper-Samuelson theorem implies that trade liberalization in a labor-abundant country will:

Accepted Answer

Raise wages and lower returns to capital

Answer

Lower wages and raise returns to capital

Answer

Raise both wages and returns to capital

Answer

Leave factor prices unchanged

Question 2

A quota is different from a tariff primarily because a quota:

Accepted Answer

Directly limits the quantity of imports

Answer

Generates government revenue

Answer

Raises domestic prices

Answer

Discriminates against foreign producers

Question 3

Currency 'contagion' refers to:

Accepted Answer

A financial crisis in one country spreading to others via exchange rate pressures

Answer

Central banks deliberately spreading inflation

Answer

Trade disputes escalating to currency wars

Answer

Hyperinflation caused by printing money

Question 4

The Balassa-Samuelson effect explains why:

Accepted Answer

Richer countries tend to have higher price levels

Answer

Poorer countries always have weaker currencies

Answer

Trade deficits cause inflation

Answer

Interest rates are higher in developing nations

Question 5

Special Drawing Rights (SDRs) are:

Accepted Answer

An international reserve asset created by the IMF

Answer

A currency issued by the World Bank

Answer

US Treasury bonds held by the IMF

Answer

Fixed exchange rate commitments between G7 nations

Question 6

Transfer pricing manipulation by multinational corporations typically aims to shift:

Accepted Answer

Profits from high-tax to low-tax jurisdictions

Answer

Labor from high-wage to low-wage countries

Answer

Production to countries with weak environmental rules

Answer

Debt to countries with lenient bankruptcy laws